Archive for the ‘Economics’ Category

Believers in the American dream still talk about how people who had nothing managed to pull themselves up by their bootlaces and make it big. Proponents of socialism point out that such economic mobility almost never happens. Are believers in the American dream right? Can somebody from poverty elevate themselves to the middle class or higher? Are the socialist right? Is such economic mobility a pipe dream? They’re both correct.

In a free market and where property rights are recognized it is certainly possible for a person to elevate themselves from poverty to a comfortable or even luxurious life. However, such mobility seldom happens this day an age. Where both parties get things wrong is believing that the United States has a free market and property rights.

Asset forfeiture primarily targets the poor. Most forfeitures are for small amounts: in 2012, the Institute for Justice, a libertarian law firm that has focused heavily on asset forfeiture, analyzed forfeiture in 10 states and found that the median value of assets seized ranged from $451 (Minnesota) to $2,048 (Utah). Given that law enforcement routinely take everything they find in a forfeiture case, these small values suggest the relative poverty of the victims.

The procedural hurdles for challenging asset forfeiture also mean that poor people are less able to get their money back. The average forfeiture challenge requires four weekdays in court; missing four days of work can be a prohibitive expense for Americans living paycheck to paycheck. Additionally, claims are challenged in civil court, where the right to counsel doesn’t apply, meaning that claimants need to hire their own lawyer.

Asset forfeiture is especially dangerous for the unbanked, because police and federal agents consider high amounts of cash to be suspect. In 2013, half of all households with incomes of less than $15,000 were either unbanked or underbanked. In a report on non-criminal asset forfeiture, the Center for American Progress argues that “low-income individuals and communities of color are hit hardest” by forfeiture.

Civil asset forfeiture allows the State to seize your property if one of its law enforcers accuses you of a drug crime or affiliation with terrorism. The only time proof comes into play with civil asset forfeiture is when the accused party has to prove that the officer’s accusation was incorrect, which is nearly impossible to do under ideal circumstances. However, as the article notes, poor individuals aren’t operating under ideal circumstances. Many of them cannot afford to take several days off of work to plead their case in court. This makes them prime targets for civil asset forfeiture because law enforcers know that they chances of the property being returned to its rightful owner is practically zero.

As I noted, economic mobility requires property rights because you have to be able to keep what wealth you acquire. If you’re able to scrape together some capital to start a side business but then have that capital stolen, your ability to elevating yourself economically through entrepreneurship is also stolen.

Expanding on my previous post, many people have fallen into the trap of believing that the solution to unemployment is to create more jobs. On paper is seems to make sense. If people don’t have jobs then the solution is to create jobs. However, unemployment is a symptom of a problem, not the actual problem itself:

But employment is not an end in and of itself. Rather, it is a means to an end: namely the increased standard of living that the worker obtains by trading his labor for wages.

In a free market, employment is a value creation process — with jobs stemming from the wants and needs of consumers as conveyed through the price system.

It is this productive nature of free-market jobs that make them desirable and capable of increasing a worker’s standard of living.

Wages spring directly from, and are proportional to, the degree in which a job creates wealth by helping to satisfy an unmet need. As is the case for all mutually-agreeable trades in a free market, both sides gain and wealth is created: the worker receives wages that he values more than his labor and the consumer receives a product or service he values more than its price.

In other words, a worker’s wages are reflective of the additional wealth he helped create, which enables his newly improved standard of living.

Because government-created jobs are devoid of this wealth creation process, they are merely a transfer of wealth from taxpayers to the program’s beneficiaries.

Unemployment stems from a lack of wealth. Most often the lack of wealth is caused by government. Through their burdensome regulations governments place roadblocks in front of entrepreneurs that prevents them from creating new wealth. Through their burdensome taxes governments siphon wealth from practically everybody under their rule. Government regulations also force currently existing wealth to be misallocated.

Solving unemployment by having the government create jobs actually exacerbates the problem. Since governments needs to siphon more wealth from the economy to create jobs there is less wealth in the hands of producers and consumers, which means consumers aren’t able to buy as much so producers respond by producing less. Eventually the drop in production forces producers to lay off employees, which increases the amount of unemployment. You can see where this vicious cycle ends up.

The solution to unemployment is to reduce the amount of wealth being siphoned by governments. With more wealth in hand entrepreneurs can create more wealth, which will actually allow the unemployment issue to be solved.

Minimum wage laws are seen by many as a mechanism to uplift the poor by ensuring every employee receives a “living wage.” For the economically ignorant that fairytale makes sense. For those with even a slight understanding of economics it’s a recipe for disaster.

The problem with minimum wage laws is the same problem with any government writ, they’re based on coercion instead of market forces. Market forces are based on wealth creation. When more wealth is created employees can be paid. Government writ doesn’t create new wealth so minimum wage laws rely on the current amount of wealth. Since the employers don’t have more wealth to draw from they’re forced to increase their prices to compensate, which often makes their product unaffordable to those who could previously afford it:

The U.S. restaurant industry is in a funk. Blame it on lunch.

Americans made 433 million fewer trips to restaurants at lunchtime last year, resulting in roughly $3.2 billion in lost business for restaurants, according to market-research firm NPD Group Inc. It was the lowest level of lunch traffic in at least four decades.

[…]

Cost is another factor working against eating out for lunch. While restaurants have raised their tabs over the past few years to cope with rising labor costs, the price of food at supermarkets has continued to drop, widening the cost gap between bringing in lunch and eating out.

Statists often scoff at the idea that minimum wage laws hurt the poor. How could laws that are advertised as helping the poor possibly hurt the poor? By forcing employers to increase their prices and thus make their product that was previous affordable to poorer individuals unaffordable.

The best way to help uplift the poor is to create more wealth. Creating more wealth requires fulfilling the wants and needs of consumers. Commands from governments cannot accomplish that no matter how many people vote in favor of them.

It was brought to my attention that an Internet meme managed to nail a multi-million reality television show. This news didn’t surprise me because she became an Internet meme by being trashy and trashy television sells. Some people aren’t happy about this because they think everybody should watch highbrow television (i.e., whatever television show they like). But the market has spoken and while the market can’t give consumers taste, it does at least give them a choice:

According to reports, Danielle Bregoli, the 14-year-old girl who became a popular internet meme this year due to a failed intervention on the Dr. Phil show, has signed a deal for her own reality television show. On a personal level, there is much to find offensive in Bregoli’s fame, in spite of her obvious marketing prowess. She is, after all, internet-famous simply for her improper English, toxic personal behavior, and apparent lack of respect for anyone around her. On an economic level, however, her rise is an interesting example of how capitalism rewards the interests of the masses, regardless of the opinion of the cultural elite.

[…]

Capitalism cannot give consumers taste, just as democracy cannot give voters wisdom. What capitalism does do, however, is give consumers choice — and creates the incentives necessary for producers to meet the desires of the people. Democracy simply offers the masses the ability to enforce the whims of the majority against the wishes of the minority. In America no one will be forced to watch a minute of a reality show about Danielle Bregoli, but should it find commercial success, its viewers will have the ability to shape American policy going forward.

A lot of people believe that their preferences should be everybody’s preferences. State socialism is the ultimate expression of their attitude because the State controls all means of production and therefore dictates what will and will not be provided to consumers. Whoever controls the State, in that case, controls what options consumers have.

Markets work the other way. Anybody can possess means of production and therefore bring options to consumers. Whether one wants media that forces a particular viewpoint down consumers’ throats, show epic space battles, or feature annoying teenage girls being jackasses, they can have their show under a market economy. So while I might judge your for your tastes, the market won’t.

Fourth generation, or asymmetrical, warfare is much more reliant on economics than firepower. Instead of attacking an enemy directly, a military practicing fourth generation warfare tries to slowly chip away at its enemy until that enemy loses the ability or will to fight. If, for example, a military can cost their enemy $3 million by spending $200 it’s only a matter of time until their enemy is bankrupt:

A Patriot missile – usually priced at about $3m (£2.5m) – was used to shoot down a small quadcopter drone, according to a US general.

The strike was made by a US ally, Gen David Perkins told a military symposium.

“That quadcopter that cost 200 bucks from Amazon.com did not stand a chance against a Patriot,” he said.

According to the story, the missile was fired by an unspecified United States ally. Perhaps they were given the Patriot launcher for free and therefore aren’t concerned about the cost disparity. But anybody looking at the United States and its allies is probably getting some clever ideas. Sure, it’s unlikely that a Patriot will be used to take down a cheap quadcopter again but the basic idea is pretty solid, cheap drones can lead to an expenditure of expensive military equipment.

If the United States’ allies continue pulling this kind of stunt the country will have to decide whether it will keep handing out expensive toys or not. If not, its allies will be weakened and its enemies will be able to declare a victory. If so, the United States will continue throwing money down a hole until it’s bankrupt, which will cause its enemies to declare victory as well. There’s no winning when you enemy can cost you millions of dollars by spending a couple of hundred dollars.

Minnesotans who aren’t Hall of Fame quarterbacks can still make a play to get in the action for the 2018 Super Bowl.

The Minnesota Host Committee needs 10,000 volunteers to run the event, and the process starts Wednesday with online applications.

[…]

Obviously, volunteers don’t get paid, but they do get a complete Super Bowl LII outfit unique to the effort that will include top-grade winter gear, including a parka built to withstand extreme cold, a sturdy backpack, beanie and thermos.

Talk about a sucker’s deal. 10,000 people will provide labor to the National Football League (NFL) and in return they only receive marketed attire that will allow them to act as free walking advertisements in the future. They don’t even receive a free ticket to the event they’re going to bust their asses for. And you know what? The Minnesota Host Committee will get its volunteers. It’ll probably get so many volunteers that it’ll be able to pick and choose who it wants.

To me this demonstrates the sordid state of economic education in this country. Anybody willing to provide free labor to a multibillion dollar organization is a goddamn fool in my book. Especially when you consider the fact that the organization needs workers and would therefore offer some kind of actual compensation if nobody was stupid enough to provide labor for free.

The Foundation for Economic Education posted an excellent article explaining how absurd it would be to run grocery stores like public schools. But the best piece of information in the article is this:

One often hears that education is too important to leave to the whims of the market. Yet food is even more important; it’s a prerequisite before education can be considered. In spite of this, the (relatively) free market in food seems to work quite well.

Consumers get a wide variety at a low cost. Even people that have niche dietary requirements like gluten-free or vegan have products suited to them. And while complaints about the quality of public education are rampant, one rarely hears objections about the quality of the grocery stores. In the latter case, people don’t have to complain; they just take their business to someone who will serve them better.

Education isn’t even possible if one doesn’t have enough food to survive. Yet public education is a sacred cow. If you criticize public education or, worse, advocate for its complete elimination you are going to hear a lot of people accusing you of hating children. However, if you don’t advocate for socializing grocery stores nobody cares. In fact, everybody seems to be fine with grocery stores remaining private.

Don’t get me wrong, I’m glad that grocery stores in the United States are private. If they weren’t they’d operate like the grocery stores in the former Soviet Union or current ones in Venezuela. You’d have to wait in line for hours just to find out that the store doesn’t have anything you need in stock.

In a new sign that Venezuela’s financial crisis is morphing dangerously into a humanitarian one, a new nationwide survey shows that in the past year nearly 75 percent of the population lost an average of 19 pounds for lack of food.

The extreme poor said they dropped even more weight than that.

The 2016 Living Conditions Survey (Encovi, for its name in Spanish), conducted among 6,500 families, also found that as many as 32.5 percent eat only once or twice a day — the figure was 11.3 just a year ago.

How can the people of a nation with such plentiful resources end up starving? Through the wonders of socialism!

Venezuela is yet another example in a long, sad list of examples of centrally planned economics failing. As Ludwig von Mises explained so thoroughly, centrally planned economies are always doomed to fail. It’s not possible for a handful of individuals to accurate determine the wants and needs of millions of people. Especially when the wants and needs of every single one of those millions of people are constantly changing.

The only question here is whether or not the Venezuelan government will do the decent thing and disband itself or if the people will have to rise up and overthrow it.

Donald Trump has promised to bring in a new wave of protectionism for American businesses. This news has been met with cheers from the small government advocates in the Republican Party. The democrats haven’t been cheering but only because Donald Trump is promising it. If Hillary Clinton had promised it they would be cheering but at least the cheering wouldn’t come immediately after claiming they’re for a small government.

Protectionism is almost always promised by people who blame foreign countries from a bad domestic economy and this case is no different. Trump and the republicans are claiming that China has been stealing American jobs. But Jack Ma, Chinese billionaire, sees things slightly differently:

Ma says blaming China for any economic issues in the U.S. is misguided. If America is looking to blame anyone, Ma said, it should blame itself.

“It’s not that other countries steal jobs from you guys,” Ma said. “It’s your strategy. Distribute the money and things in a proper way.”

He said the U.S. has wasted over $14 trillion in fighting wars over the past 30 years rather than investing in infrastructure at home.

While I disagree with his claim that the money was merely misappropriated, he’s entirely correct in saying that the $14 trillion spent in fighting wars was wasted.

Any economist who isn’t a complete moron, of which there are very few, knows that wars don’t produce wealth. Sure, it often looks like wars are good for the economy because jobs are created to feed the war machine but none of those jobs are productive. They exist to destroy wealth. Every piece of military machinery is build to be destroyed. Ammunition is expended. Tanks are either destroyed in combat or destroyed after they’ve been made obsolete by a new tank. Aircraft carriers that aren’t sunk by the enemy are sunk by the owners when they’re decommissioned to make way for the new fleet. Every building, road, and telephone pole destroyed in a war must be rebuilt afterwards. No actual wealth is created by war. Wealth is merely dumped into building expendable equipment or redoing work that was previously done. This is also why fourth generation warfare is so effective. One side spends pennies while the other spends trillions.

Instead of waging an endless war, the people of the United States could have been doing productive things. But the government chose warfare, the people rolled over and accepted warfare, and a huge amount of wealth has been diverted to unproductive endeavors, which has done nothing good for the economy. China isn’t taking American jobs, the United States government is destroying those jobs.